Obama arrived in China Sunday and gave a speech saying that the US will not try to contain China. Indeed he spoke of a Pacific free trade zone. He did however stop short saying that the US would join in such folly as was the policy of the Bush Adm. The U.S. trade deficit, which ballooned by more than 18 percent to $36.5 billion in September alone must give Obama pause about continuing the full speed dash toward the abyss.
Our President is popular in China, especially among the young, of course with the decades old one child policy the young are a small minority in China. But you need to remember the scale that they operate on, with a population between 1.3 and 1.5 billion (nobody in the west knows for sure), that’s still a lot of young people. There are more fluent English speakers in China than in the US even if you count Republican voters as fluent English speakers.
Obama is not as popular as Bush was. Many Chinese are wary and think of him as more of a cult figure, you can buy T-shirts in Beijing with Obama wearing a Mao jacket. Indeed Bush should be more popular since he gave China many trillions of Dollars and a big leg up toward world domination. Many are afraid that Obama wants the money back, he talks about a strong Dollar but his real policy apparently is a weak Dollar. Obama’s speech only made the evening news on the main network in China after 27 minutes in and after a story about a rural policeman who seems to spend most of his time helping old women husk their corn crop.
Indeed China has been very concerned about Obama’s policies. Liu Mingkang, China’s chief banking regulator, said that the combination of a weak dollar and low interest rates had encouraged a "huge carry trade" (by using one countries cheap currency and low interest to buy another countries market assets, in this case using USD to buy everything) and that this "carry trade" was having a "massive impact on global asset prices".
Since the Chinese currency is unofficially pegged to the USD there is rising international criticism that China’s currency is undervalued. Mr Liu’s unusually blunt remarks underscore how China – the largest US creditor because of its massive holdings of Treasury bonds plus another trillion give or take in increaingly worthless cash – China has become a forceful critic of US fiscal and monetary policies to say the least.
The Federal Reserve has a policy of cheap money and plenty of it (if you are Wall Street bank) and to quote Mr Liu, [This] "is boosting speculative investment in stock and property markets and will pose new, real and insurmountable risks to the global recovery and particularly to the recovery in emerging markets,"
However, Mr Liu’s criticism of the Fed comes as China’s own monetary policy is attracting growing scrutiny at home. Critics say the massive expansion in bank loans this year could cause asset price bubbles and inflation. China was forced to launch a stimulus plan equal to the US to avoid a panic at home since prior to the crash in the US, 40% of China’s economy was exports.
China has warned the US repeatedly not to try to inflate its way out of its debts. In reality the US has no choice but to inflate the Dollar unless it defaults and prints new currency. Even if we had an economy again, it would never be possible to produce enough goods to repay the debt the Republicans have run up at any thing close to the Dollar’s current value. Oh by the way, on Friday we spent another billion Dollars cleaning up three more Republican bank failures, but that’s chicken feed, the interest on the debt the Republicans left behind is moving toward two billion everyday. www.prairie2.com - where we party like it’s 2011